Financial Markets Conduct (Insider Trading - Fonterra Co-operative Group Limited) Exemption Notice 2025

This exemption is granted by the Financial Markets Authority under section 556 of the Financial Markets Conduct Act 2013, after being satisfied of the matters set out in section 557 of that Act.

Contents

1. Title
2. Commencement
3. Revocation
4. Interpretation
5. Certain trading exempted from insider conduct prohibitions
6. Certain advice and encouragement exempted from insider conduct prohibitions

Notice

1 Title

This notice is the Financial Markets Conduct (Insider Trading - Fonterra Co-operative Group Limited) Exemption Notice 2025.

2 Commencement

This notice comes into force on 5 December 2025.

3 Revocation

This notice is revoked on 4 December 2030.

4 Interpretation

1. In this notice, unless the context otherwise requires,—

Act means the Financial Markets Conduct Act 2013

compulsory acquisition powers means the rights of Fonterra to require a shareholder to acquire further co-operative shares, pursuant to Fonterra's constitution

compulsory disposal powers means the rights of Fonterra to require a shareholder to dispose of co-operative shares, pursuant to Fonterra's constitution

co-operative share has the meaning given in section 5(1) of the Dairy Industry Restructuring Act 2001

exempt adviser means a person who holds inside information obtained in the person's capacity as a director, officer, or employee of Fonterra, or as a member of the Fonterra co-operative council (whether or not the person is in that position when the advice or encouragement is given)

exempt trader means a person who holds inside information obtained in the person's capacity as a director, officer, or employee of Fonterra or as a member of the Fonterra co-operative council (whether or not the person is in that position when the trading is undertaken), and any other person (including any person acting jointly with the person holding that information) who would be considered to also hold that inside information solely by virtue of the first person holding the information

Fonterra means Fonterra Co-operative Group Limited

Fonterra co-operative council means the co-operative council established by Fonterra's constitution

Fonterra fund security means a new co-op fund security (as referred to in section 109D(1)(b)(i) of the Dairy Industry Restructuring Act 2001)

independent agent means any one or more independent investment broker or similar firm appointed by Fonterra pursuant to Fonterra's constitution

Regulations means the Financial Markets Conduct Regulations 2014.

2. Any term or expression that is defined in the Act or the Regulations and used, but not defined, in this notice has the same meaning as in the Act or the Regulations.

5 Certain trading exempted from insider conduct prohibitions

1. An exempt trader who undertakes a trade described in clause 5(2) is exempted from—
   1. section 241 of the Act; and
   2. section 240 of the Act to the extent that it applies in relation to section 241.
2. The exemptions in clause 5(1) apply to trading in co-operative shares or Fonterra fund securities that —
   1. is undertaken in connection with enabling the exempt trader to acquire or dispose of the minimum number of co-operative shares or Fonterra fund securities necessary to comply with a requirement, imposed by or under Fonterra's constitution, to hold no more than a maximum or no less than a minimum number of co-operative shares; and
   2. is not influenced by the inside information held by the exempt trader.
3. The exemptions described in clause 5(1) also apply to trading in co-operative shares or Fonterra fund securities that is undertaken by Fonterra or an independent agent pursuant to the compulsory acquisition powers or compulsory disposal powers and is not influenced by inside information held by Fonterra.

6 Certain advice and encouragement exempted from insider conduct prohibitions

1. An exempt adviser who gives advice or encouragement described in clause 6(2) is exempted from —
   1. section 243 of the Act; and
   2. section 240 of the Act to the extent that it applies in relation to section 243.
2. The exemptions in clause 6(1) apply to advice or encouragement to trade or hold co-operative shares or Fonterra fund securities that —
   1. is given by an exempt adviser in connection with enabling any person to acquire or dispose of the minimum number of co-operative shares or Fonterra fund securities necessary to comply with a requirement, imposed by or under Fonterra's constitution, to hold no more than a maximum or no less than a minimum number of co-operative shares; and
   2. is not influenced by the inside information held by the exempt adviser.

Statement of Reasons

This notice comes into force on 5 December 2025 and is revoked on 4 December 2030. The notice exempts certain persons from complying with certain prohibitions imposed under sections 240, 241 and 243 of the Financial Markets Conduct Act (the Act).

The notice continues, with changes, the exemptions granted under the Financial Markets Conduct (Insider Trading - Fonterra Co-operative Group Limited) Exemption Notice 2020 (2020 Notice), which was revoked on 30 November 2025. The exemptions in this notice are narrower than those in the 2020 Notice. The exemptions in this notice do not relate to trading, or advising or encouraging others to trade for the purposes of increasing voting rights or the price paid for milk supply. Additionally, the circumstances in which the exemptions may be relied upon are limited to the acquisition or disposal of the minimum number of co-operative shares or Fonterra fund securities necessary to meet the requirements of Fonterra’s constitution.

Background –

• The Dairy Industry Restructuring Act 2001 was amended in 2012 to provide for (among other things) the establishment of a new share trading system: Trading Among Farmers (TAF). When TAF was established, its key components included:
  • a fund (the Fonterra fund) that was established to hold co-operative shares and issue securities (Fonterra fund securities) to be traded on a registered market;
  • a new market for trading, by farmers, of shares (co-operative shares) in Fonterra Co-operative Group Limited (Fonterra);
• the new market (the Fonterra Shareholders' Market) was granted market registration on 30 August 2012 under the Securities Markets Act (Fonterra Shareholders' Market) Notice of Market Registration 2012;
• pursuant to clause 42 of Schedule 4 of the Act, NZX Limited was deemed to hold, under the Act, a financial product market licence to operate the Fonterra Shareholders' Market;
• farmers were able to trade co-operative shares freely on the Fonterra Shareholders' Market. If permitted by Fonterra, farmers were also able to sell the rights derived from their co-operative shares to the Fonterra fund but retain a voucher that could be treated as the equivalent of a co-operative share for the purposes of complying with a requirement of Fonterra's constitution;
• on 28 March 2023, Fonterra instigated a flexible shareholding structure (flexible shareholding), with the key components of TAF set out above remaining unchanged except that shareholders could no longer retain vouchers that could be treated as the equivalent of a co-operative share. Flexible shareholding is intended to make it easier for new farmers to join Fonterra and for existing farmers to remain in Fonterra by allowing greater flexibility in the number of co-operative shares that must be held and, therefore, the level of investment required;
• in November 2024 Fonterra announced that it would transition the co-operative shares from the Fonterra Shareholders' Market to the NZX Main Board. The transition to the NZX Main Board took effect on 15 January 2025.

The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 557 of the Act, considers it appropriate to grant the exemption because –

• if a farmer is a current or former director, officer, or employee of Fonterra, or a current or former member of the Fonterra co-operative council (Fonterra insider), he or she may hold inside information. A person (or persons acting jointly) may also be considered to hold the inside information held by the director, employee, or current or former member of Fonterra co-operative council solely by virtue of the director, employee or member holding the information

(for example, in circumstances where the co-operative shares or Fonterra fund securities are held by the director, employee or member jointly with another person, in a trust or company, etc.);

• these directors, employees, members and other persons would ordinarily be prevented from trading or giving advice by sections 240, 241 and 243 of the Act. Despite having inside information, there are some circumstances in which it may be necessary or desirable for these directors, employees, members and other persons who are both a farmer and a Fonterra insider to trade co-operative shares or Fonterra fund securities where the person may hold less than the minimum number, or more than the maximum number, of co-operative shares permitted by or under Fonterra's constitution;
• shareholders must comply with the shareholding requirements imposed by or under Fonterra’s constitution which is applicable to them. If they do not, Fonterra may enforce compliance including by appointing an independent agent to acquire or dispose of co-operative shares on that shareholder's behalf;
• clause 5 of this exemption notice exempts a Fonterra insider from prohibitions imposed under the Act on trading undertaken in these circumstances, provided that the trading is not influenced by the inside information and is undertaken in connection with enabling the person to comply with requirements imposed by or under Fonterra’s constitution;
• a Fonterra insider may also have a responsibility to advise or encourage another person to acquire or dispose of co-operative shares in the circumstances described above. Clause 6 exempts a Fonterra insider from prohibitions imposed under the Act, provided that the advice or encouragement is not influenced by the inside information and is given in connection with enabling the person to comply with requirements imposed by or under Fonterra’s constitution;
• in the absence of this exemption notice, farmers who are potential Fonterra insiders, and who are required to trade in accordance with Fonterra’s constitution, would not be able to. That would frustrate the purpose of the Dairy Industry Restructuring Act 2001 and restrict innovation and flexibility in the financial markets;
• a person may rely on this notice in limited circumstances, in particular, a person cannot rely on the exemption if the trading is influenced by any inside information held by them. The FMA considers that the limitations uphold the policy and intent in Part 5 of the Act to prohibit insider conduct.

As such, the FMA is satisfied that –

• the exemptions promote the confident and informed participation of farmers in, and Fonterra in relation to, trading the co-operative shares by resolving inconsistencies between farmers’ obligations under the Fonterra constitution and the insider trading prohibitions. Resolving those inconsistencies means that farmers and Fonterra can confidently participate in trading the co-operative shares. Without the exemptions there would be significant uncertainty about potential liability arising from participation;
• the exemptions, and the equivalent exemptions in the predecessor notices, promote innovation and flexibility in the financial markets by facilitating the establishment and continued operation of flexible shareholding;
• the exemptions, and the equivalent exemptions in the predecessor notices, also avoid unnecessary compliance costs. Without the exemptions, the insider trading prohibitions in the Act would inhibit the establishment and continued operation of flexible shareholding and trading of co-operative shares which represents a cost. However, that cost can in the FMA’s view be avoided through the exemptions which apply in limited circumstances, without compromising the policy and intent of the Act or its other purposes. As such, the FMA considers that compliance cost to be unnecessary;
• the exemptions apply in limited circumstances and are not broader than is reasonably necessary to address the matters that gave rise to the exemptions. The exemptions address technicalities that are specific to the co-operative structure and the limited nature of the exemptions assist in facilitating such a structure to work within the policy and intent of the Act, including with regard to the general prohibition for insider trading. The limited circumstances under which the exemptions may be relied upon address the mischief of utilising inside information, as the exemption is not available where the trading is influenced by the inside information held by the person.

Dated at Auckland this 2nd day of December 2025.

Louise Unger, Executive Director, Response and Enforcement Financial Markets Authority

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Financial Markets Conduct (Insider Trading - Fonterra Co-operative Group Limited) Exemption Notice 2025 [366KB]